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Critical Access Hospitals (CAHs) are small rural hospitals that receive payment for their reasonable costs of providing inpatient and outpatient services to Medicare beneficiaries, rather than being paid fixed amounts under Medicare's prospective payment systems. Between fiscal years 1997 and 2002, 681 hospitals have become CAHs. In the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000, GAO was directed to examine requirements for CAH eligibility, including the ban on inpatient psychiatric or rehabilitation distinct part units (DPUs) and limit on patient census, and to make recommendations on related program changes.

Using fiscal year 1999 hospital cost report data, GAO identified 683 rural hospitals as "potential CAHs" based on their having an annual average of no more than 15 acute care patients per day. About 14 percent (93) of these potential CAHs operated an inpatient psychiatric or rehabilitation DPU, which they would have to close to convert to CAH status. Among existing CAHs, 25 previously operated a DPU but had to close it as part of becoming a CAH. Among the potential CAHs that operated a DPU, about half had a net loss on Medicare services, indicating they might benefit from CAH conversion. Officials in some hospitals expressed a reluctance to close their DPU, even if conversion would benefit the hospital financially, as they believe the DPU maintains the availability of services in their community. Because inpatient rehabilitation and psychiatric services are disproportionately located in urban areas, even a small number of rural DPU closures may exacerbate any disparities in the availability of these services. Using 1999 Medicare claims data, GAO found 129 potential CAHs that likely would have been able to meet the CAH census limit of no more than 15 acute care patients at any given time if not for a seasonal increase in their patient census. Seasonal increases in patient census were common among the hospitals GAO studied, generally occurring during the winter flu and pneumonia season. For most potential CAHs, their patient census was typically low enough that a small seasonal increase did not cause them to exceed CAH limits. For the 129 potential CAHs that would have had difficulty staying under the CAH limit due to seasonal variation, they could have accommodated their patient volume and had greater flexibility in the management of their patient census if the CAH census limit were changed from an absolute limit of 15 patients per day to an annual average of 15 patients.

Matters for Congressional Consideration

Status: Closed - Implemented

Comments: In December 2003, as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Congress provided the authority in the Critical Access Hospital Program to establish psychiatric and rehabilitation DPUs and that the beds for the DPUs (no more than 10) would be excluded from the determining the bed limitations for critical access hospitals--25 acute care or swing beds in use on any given day. Further, the Congress required that CAH-affiliated DPUs be paid under the same formulas as other inpatient psychiatric or rehabilitation providers.

Matter: Congress may wish to consider allowing hospitals with DPUs to convert to CAH status while making allowances for DPU beds, patients, and lengths-of-stay when determining CAH eligibility, and that CAH-affiliated DPUs be paid under the same formulas as other inpatient psychiatric or rehabilitation providers.

Status: Closed - Implemented

Comments: In December 2003, as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Congress revised the bed limitation for critical access hospitals from 15 to 25 beds and thus, removed the eligibility limitation of no more than 15 acute care patients on any given day. This change permits CAHs to operate up to 25 swing beds or acute care beds and accounts for the seasonal increase in patient census that pushed the 129 potential CAHs over the limit of 15 acute care patients per day for some portion of the year.

Matter: Congress may wish to consider changing the CAH limit on acute care patient census from an absolute limit of 15 acute care patients to an annual average of 15 to give CAHs greater flexibility in the management of their patient census.